In the judgment of December 20, 2016, the Regional Court in Warsaw ordered GDDKiA to pay a consortium of contractors almost PLN 30 mln plus interest for a period of more than four years. The consortium of Polimex-Mostostal S.A., Mostostal Warszawa S.A. and Acciona Infraestructuras S.A. was represented by the law firm White & Case. The judgment is now final and enforceable.

The case regarded the consortium’s claim for payment of the remuneration for construction works, which GDDKiA did not pay, stating that it had deducted its own claim for the payment of a contractual penalty. The court ruled that GDDKiA was not entitled to a penalty and ordered that the entire requested amount plus interest be paid to the consortium members. The contract between the parties was executed on the basis of the so-called FIDIC Yellow Book.

The essence of the case was whether a contractor is required to introduce changes to a revised work program demanded by an engineer. The problem arose from the fact that during the performance of the construction works on the A2 motorway the contractor encountered certain objective obstacles (e.g., delayed access to the construction site, the Rawka River overflowing its banks, etc.). Consequently, in the revised version of the program the contractor indicated that certain works might be finished after the completion date indicated in the contract. The employer and the engineer insisted that such revision of the program was a violation of the contract. In GDDKiA’s opinion, the revised program could not include completion dates other than those indicated in the contract. The engineer therefore instructed the contractor to take into account its remarks concerning the noncompliance of the revised program by presenting a revision indicating that all the works would be completed on time. The contractor did not comply with that instruction and insisted that it was entitled, and moreover obliged, to include completion dates in the revised program that were, at a given moment, realistic in its opinion.

GDDKiA therefore imposed a contractual penalty on the contractor in the amount of 0.03% of the contract price for each day that the engineer’s remarks on the revised program were not taken into consideration. The penalty was almost PLN 30 million. Next, GDDKiA deducted the penalty amount from the contractor’s remuneration, even though the contractor was able to eliminate the delay so that ultimately the construction works were completed on time.

The Regional Court in Warsaw agreed with the consortium’s view that the program should reflect the actual state of construction works and not hypothetical assumptions. The court emphasized that the program served an informational purpose and the contractor was in fact obliged to indicate in the revised program all threats that could impact the timely completion of the works.

The court also stated that the fact that the contractor is required to take into account the engineer’s comments on the revised program does not mean that it must introduce all the changes demanded by the engineer. The court therefore found that the contractor had not breached the contract and consequently it could not be ordered to pay a contractual penalty. The deduction of the penalty from the remuneration for the works was thus ineffective.

The White & Case team handling the matter included: Michał Subocz, partner and head of the Disputes Resolution practice, Piotr Bytnerowicz, counsel, and Katarzyna Misztal and Łukasz Zbyszyński, associates.